<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-13104
MRI Business Properties Fund, Ltd.
(Exact name of Registrant as specified in its charter)
California 94-2919856
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Insignia Financial Plaza, P.O. Box 1089, Greenville S.C. 29602
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (864) 239-1000
5665 Northside Drive N.W., Georgia 30328
Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No_____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date __________________.
1 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
December 31, September 30,
1995 1995
Assets
Cash and cash equivalents $ 4,015,000 $ 3,795,000
Other assets 502,000 474,000
Real Estate:
Real estate 38,248,000 38,220,000
Accumulated depreciation (10,329,000) (10,225,000)
Allowance for impairment of value (12,981,000) (12,981,000)
------------ ------------
Real estate, net 14,938,000 15,014,000
Deferred costs, net 389,000 414,000
------------ ------------
Total assets $ 19,844,000 $ 19,697,000
============ ============
Liabilities and Partners' Equity
Note payable $ 1,099,000 $ 1,110,000
Accounts payable, accrued liabilities and interest 540,000 528,000
Due to affiliate -- 50,000
------------ ------------
Total liabilities 1,639,000 1,688,000
------------ ------------
Partners' Equity:
General partners (deficit) (1,045,000) (1,049,000)
Limited partners equity (82,158 units
outstanding at December 31, 1995 and
September 30, 1995) 19,250,000 19,058,000
------------ ------------
Total partners' equity 18,205,000 18,009,000
------------ ------------
Total liabilities and partners' equity $19,844,000 $19,697,000
============ ============
See notes to consolidated financial statements.
2 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Consolidated Statements of Operations
For the Three Months Ended
December 31, December 31,
1995 1994
Revenues:
Commercial operations $ 848,000 $ 816,000
Hotel lease -- 85,000
Interest and other income 41,000 41,000
Gain on sale of property -- 2,097,000
---------- ----------
Total revenues 889,000 3,039,000
---------- ----------
Expenses:
Hotel operations -- 59,000
Commercial operations 451,000 465,000
Depreciation 104,000 300,000
Interest 25,000 258,000
General and administrative 113,000 125,000
---------- ----------
Total expenses 693,000 1,207,000
---------- ----------
Income before extraordinary item 196,000 1,832,000
Extraordinary item:
Gain on extinguishment of debt -- 4,596,000
---------- ----------
Net income $ 196,000 $6,428,000
========== ==========
Net income per limited partnership unit:
Income before extraordinary item $ 2.34 $ 17.26
Extraordinary item -- 44.76
---------- ----------
Net income $ 2.34 $ 62.02
========== ==========
See notes to consolidated financial statements.
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Consolidated Statement of Partners' Equity (Deficit)
For the Three Months Ended December 31, 1995
General Limited Total
Partners' Partners' Partners'
(Deficit) Equity Equity
Balance - October 1, 1995 $(1,049,000) $19,058,000 $18,009,000
Net income 4,000 192,000 196,000
----------- ----------- -----------
Balance - December 31, 1995 $(1,045,000) $19,250,000 $18,205,000
=========== =========== ===========
See notes to consolidated financial statements.
4 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Consolidated Statements of Cash Flows
For the Three Months Ended
December 31, December 31,
1995 1994
Operating Activities:
Net income $ 196,000 $ 6,428,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Gain on sale of property -- (2,097,000)
Extraordinary gain on extinguishment of debt -- (4,596,000)
Depreciation and amortization 139,000 334,000
Deferred costs paid (10,000) (14,000)
Provision for doubtful receivables -- (1,000)
Changes in operating assets and liabilities:
Other assets (28,000) (159,000)
Accounts payable, accrued liabilities and interest 12,000 (1,294,000)
Due to affiliate (50,000) --
----------- -----------
Net cash provided by (used in) operating activities 259,000 (1,399,000)
----------- -----------
Investing Activities:
Net proceeds from sale of property -- 27,681,000
Additions to real estate (28,000) (401,000)
----------- -----------
Net cash (used in) provided by investing activities (28,000) 27,280,000
----------- -----------
Financing Activities:
Satisfaction of notes payable -- (27,051,000)
Notes payable principal payments (11,000) (17,000)
----------- -----------
Cash (used in) financing activities (11,000) (27,068,000)
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents 220,000 (1,187,000)
Cash and Cash Equivalents at Beginning of Period 3,795,000 5,031,000
----------- -----------
Cash and Cash Equivalents at End of Period $ 4,015,000 $ 3,844,000
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash during the period $ 24,000 $ 1,161,000
=========== ===========
See notes to consolidated financial statements.
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements, related footnotes and discussions contained in the Partnership's
Annual Report for the year ended September 30, 1995.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature, except for the gain on sale of property and the gain on
extinguishment of debt, as discussed in Note 3.
The results of operations for the three months ended December 31, 1995 and
1994 are not necessarily indicative of the results to be expected for the
years ended September 30, 1996 and 1995, respectively.
On January 19, 1996, the stockholders of NPI, Inc. sold all of the issued
and outstanding stock of NPI, Inc. to an affiliate of Insignia Financial
Group ("Insignia"). As a result of the transaction, the Managing General
Partner of the Partnership is controlled by Insignia. Insignia affiliates
now maintain the Partnership books and records and oversee its operations.
Property management and asset management services continue to be performed
by unaffiliated third parties. The limited partnership units owned by
Deforest Ventures I, L.P., representing approximately 31% of total limited
partnership units, were not acquired by Insignia.
2. Transactions with Related Parties
An affiliate of the Managing General Partner received reimbursement of
administrative expenses amounting to $30,000 and $32,000 during the three
months ended December 31, 1995 and 1994, respectively. These reimbursements
are included in general and administrative expenses.
3. Gain on Sale of Property and Extraordinary Gain on Extinguishment of
Debt
On October 24, 1994, the Partnership sold its Dallas Marriott Quorum Hotel
for $29,815,000. After repayment of the first and second mortgage loan
balances of $22,221,000 (including $170,000 of accrued interest) and
$5,000,000, respectively, deferred interest of $750,000 and closing costs
and adjustments of $515,000, the cash received by the Partnership was
$1,329,000. Under the terms of the agreement, cash in the hotel's bank
account of approximately $1,980,000 was retained by the purchaser, to be
used as a partial repayment of the second loan. Accrued but unpaid interest
of approximately $4,596,000 on the second loan was forgiven by the lender.
The sale resulted in a gain of $2,097,000 and an extraordinary gain on
extinguishment of debt of $4,596,000.
4. Subsequent Event
On January 11, 1996, the Partnership distributed $3,315,000 ($40.35 per
unit) and $68,000 to the limited and general partners, respectively, from
working capital reserves.
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
This item should be read in conjunction with the Consolidated Financial
Statements and other items contained elsewhere in this Report.
Liquidity and Capital Resources
Registrant's remaining real estate properties consist of three office buildings,
one office/warehouse complex and one shopping center located in Colorado,
Arizona, Texas, and Georgia. The commercial properties are leased to tenants
subject to leases currently ranging from one to seven years. All of Registrant's
remaining properties generated positive cash flow for the three months ended
December 31, 1995. Registrant receives rental income from commercial spaces and
is responsible for operating expenses, administrative expenses, capital
improvements and debt service payments. Registrant is marketing all of its
properties for sale. As of February 1, 1996, two of the eight properties
originally purchased by Registrant were sold and one was lost through
foreclosure.
Registrant uses working capital reserves from any undistributed cash flow from
operations, proceeds from mortgage financings and the sale of properties as its
primary sources of liquidity. On January 11, 1996, Registrant distributed
$3,315,000 ($40.35 per unit) to the limited partners and $68,000 to the general
partners, from working capital reserves. Management is currently negotiating a
lease extension with a tenant that occupies 75% of Registrant's Mardot II
office/warehouse complex, whose lease expires in March 1996. A significant
portion of the unoccupied space at Parkway Village Shopping Center is currently
being marketed to potential long term tenants. In addition, a tenant occupying
approximately 41% of Parkway Village Shopping Center may not renew its lease,
which expires on October 31, 1996. The re-leasing of these spaces might require
significant expenditures for tenant installations and leasing commissions. If
the spaces are not re-leased, it will have a significant negative impact on
Registrant's operations.
Registrant's level of liquidity based upon cash and cash equivalents experienced
a $220,000 increase at December 31, 1995, as compared to September 30, 1995.
Registrant's $259,000 of cash provided by operating activities was only slightly
offset by $28,000 of cash used for improvements to real estate (investing
activities) and $11,000 of cash used for mortgage principal payments (financing
activities). All other increases (decreases) in certain assets and liabilities
are the result of the timing of receipt and payment of various operating
activities.
In December 1995, Registrant entered into a contract to sell its Norwood Tower
Office Building for $5,750,000. The sale, which is subject to the purchaser's
due diligence review and other customary conditions, is expected to close in
April 1996. If the sale is consummated, Registrant expects to receive net
proceeds of approximately $5,500,000. For financial statement purposes, no gain
or loss on sale would be recognized since Registrant has already provided for an
impairment of value to reduce the carrying value of the property to its
estimated fair value.
7 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources (Continued)
Working capital reserves are invested in a money market account or in repurchase
agreements secured by United States Treasury obligations. The Managing General
Partner believes that, if market conditions remain relatively stable, cash flow
from operations, when combined with working capital reserves and proceeds from
the sale of properties will be sufficient to fund required capital improvements
and regular debt service payments in fiscal 1996 and the foreseeable future. In
the event that additional resources are required, the Managing General Partner
could attempt to arrange further financing, refinancing or borrow under the
credit line (of up to $150,000 per property) provided by the Managing General
Partner. Registrant has no outstanding amounts due under this line of credit.
Based on present plans, management does not anticipate the need to borrow in the
near future. Other than cash and cash equivalents, the line of credit is
Registrant's only unused source of liquidity.
On January 19, 1996, the stockholders of NPI, Inc., the sole shareholder of NPI
Equity II, sold to Insignia all of the issued and outstanding stock of NPI, Inc.
Insignia has elected new officers and directors of NPI Equity II. The Managing
General Partner does not believe these events will have a significant effect on
Registrant's liquidity or results of operations or upon the marketing of the
Registrant's assets previously initiated by the former officers.
At this time, it appears that the investment objective of capital growth will
not be attained and that a significant portion of invested capital will not be
returned to investors. The extent to which invested capital is returned to
investors is dependent upon the performance of Registrant's remaining properties
and the markets in which such properties are located and on the sales price of
the remaining properties. Registrant is currently marketing its remaining
properties for sale. Registrant, however, does not believe it will be able to
maximize some of the properties sales prices until a substantial portion of the
vacant space is re-leased and leases which are due to expire in 1996 are renewed
or the space re-leased. Upon sale of all properties and termination of the
Partnership, the general partners may be required to contribute certain funds to
the Partnership in accordance with the partnership agreement.
Real Estate Market
The national real estate market has suffered from the effects of the real estate
recession including, but not limited to, a downward trend in market values of
existing properties. In addition, the bailout of the savings and loan
associations and sales of foreclosed properties by auction reduced market values
and caused a further restriction on the ability to obtain credit. These factors
caused a decline in market property values and served to reduce market rental
rates and/or sales prices. Management believes, however, that the emergence of
new institutional purchasers, including real estate investment trusts and
insurance companies, relatively low interest rates and the improved economy,
have created a more favorable market for Registrant's properties.
8 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Results of Operations
Three Months Ended December 31, 1995 vs. December 31, 1994
Operating results (before extraordinary gain on extinguishment of debt) declined
by $1,636,000 for the three months ended December 31, 1995, as compared to 1994,
as the decrease in revenues of $2,150,000 was only partially offset by the
decrease in expenses of $514,000. Operating results declined due to the
$2,097,000 gain on sale of Registrant's Dallas Marriott Quorum Hotel in October
1994.
With respect to the remaining properties, operating results improved by $135,000
due to an increase in revenues of $32,000 and a decrease in expenses of
$103,000.
With respect to the remaining properties, revenue from commercial operations
increased by $32,000 for the three months ended December 31, 1995, as compared
to 1994, due to an increase in rental rates at Registrant's Priest, Norwood
Tower and Resource Park West Office Buildings and increased occupancy at
Registrant's Parkway Village Shopping Center. Occupancy and rental rates
remained relatively constant at Registrant's remaining properties. In addition,
interest income remained constant.
With respect to the remaining properties, expenses decreased for the three
months ended December 31, 1995, as compared to 1994, primarily due to a decrease
in depreciation expense of $77,000. Depreciation expense decreased due to the
additional provision for impairment of value recorded on Registrant's Norwood
Tower Office Building in June 1995, which was slightly offset by an increase in
depreciation expense due to fixed asset additions. Commercial operations and
interest expense remained relatively constant. In addition, general and
administrative expenses decreased by $12,000 during the three months ended
December 31, 1995, as compared to 1994.
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Properties
A description of the properties in which Registrant has an ownership interest
during the period covered by this Report, together with occupancy and room rate
data follows:
MRI BUSINESS PROPERTIES FUND, LTD.
OCCUPANCY AND ROOM RATE SUMMARY
Average
Occupancy Rate (%)
Three Months
Date Ended
of December 31,
Name and Location Size Purchase 1995 1994
- ----------------- ---- -------- ---- ----
Commercial Buildings:
Resource Park West Office
Building 61,000 01/84 100 100
Lakewood, Colorado sq. ft.
Priest Office Building 31,000 04/84 100 100
Tempe, Arizona sq. ft.
Mardot II Building 67,000 04/84 100 100
Tempe, Arizona sq. ft.
Parkway Village Shopping
Center 116,000 06/84 61 56
Atlanta, Georgia sq. ft.
Norwood Tower Office
Building 121,000 01/85 96 96
Austin, Texas sq. ft.
10 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No report on Form 8-K was required to be filed during the period.
11 of 12
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MRI BUSINESS PROPERTIES FUND, LTD. - FORM 10-Q - DECEMBER 31, 1995
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MRI BUSINESS PROPERTIES FUND, LTD.
By: MONTGOMERY REALTY COMPANY 83,
its Managing General Partner
By: FOX REALTY INVESTORS,
its Managing General Partner
By: NPI Equity Investments II, Inc.,
its Managing Partner
/S/ William H. Jarrard Jr.
William H. Jarrard Jr.
President and Director
/S/ Ronald Uretta
Ronald Uretta
Principal Financial Officer
And Principal Accounting Officer
12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from MRI Business
Properties Fund, Ltd. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 4,015,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 38,248,000
<DEPRECIATION> 23,310,000<F1>
<TOTAL-ASSETS> 19,844,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,099,000
<COMMON> 0
0
0
<OTHER-SE> 18,205,000
<TOTAL-LIABILITY-AND-EQUITY> 19,844,000
<SALES> 0
<TOTAL-REVENUES> 848,000
<CGS> 0
<TOTAL-COSTS> 555,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,000
<INCOME-PRETAX> 196,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 196,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 196,000
<EPS-PRIMARY> 2.34
<EPS-DILUTED> 2.34
<FN>
<F1> Depreciation includes $12,981,000 of allowance for impairment of value.
</FN>
</TABLE>
